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North Carolina Real Estate Troubles Michael Danhour
With the recent national housing market recession forcing many builder/developers into bankruptcy, including some of the nation’s largest, the risk for buyers has increased considerably.
Recent news indicates that several prominent North Carolina mountain communities are experiencing serious financial troubles, with some even closing operations. It is understandable that a large number of buyers are hesitant about the future and are deciding to postpone any real estate purchase(s).
The Asheville Citizen Times reported July 11, 2008 that “Grey Rock, the upscale housing development in Rutherford County that is home to the much publicized HGTV 2006 Dream Home has closed its sales office and shut down operations indefinitely.” Furthermore, Mike Flaskey, chief executive officer of Land Resource LLC, the Orlando-based company that is developing Grey Rock, also says “We’ve been left with no choice but to shut down several of our communities. We’ve shut five of our communities down including two in Western North Carolina.” The Asheville Citizen Times also reports that Wild Ridges (another Land Resource development) in McDowell County has also been “shut down.” Ronald Harmon, Planning Director of McDowell County says that “It is kind of a shock that they’ve shut down”, referring to Wild Ridges.
Is the market to blame for these failures?
For an accurate answer, it seems to depend on who you ask. According to press releases by some development companies, the national real estate market is to blame.
Developers, who have both integrated plans and schedules coupled with financial strength, seem to be the only players left in the marketplace. There is no doubt that the national real estate market trends have affected the North Carolina mountain market, but several community developments are still enjoying success and continue to advance with their construction plans.
Two examples are Crescent Resource (Charlotte based) and The Archer Group (Jacksonville based). Interestingly enough, both developers are financially backed by energy-based companies. Crescent Resource has backing from both Duke Energy and Morgan Stanley Real Estate Fund. The Archer Group has a solid foundation built upon the international energy giant ITERA.
Crescent Resources is the developer of Crescent Communities on Lake James, south of the Blue Ridge Mountains in North Carolina. Crescent Communities on Lake James have home sites ranging from 1 acre to 8 acres and range from the $160’s to over $1.75 million, as well as custom homes and log cabin packages. The project features Lake James (a 6,800 acre lake), a lake club, miles of trails, acres of preserve, and some mountain views - but for the buyer looking for the big mountain views, it leaves much to be desired.
The Archer Group is the developer of The Coves at Round Mountain, a 3,600 acre community located about 30 minutes south of the Blowing Rock/Boone area. The Coves at Round Mountain offers home sites ranging from 1 to 5 acres and priced from the $50’s to the $400’s, and also offers custom homes and log cabin packages. The project features a little bit of everything; stunning views of Table Rock Mountain and Grandfather Mountain, and a featured Hale Irwin 18-hole signature golf course, equestrian center, 5 miles of river frontage and plans for a 160 acre lake.
What is common between these two successful developers is their source of financing – the energy sectors. At a time when real estate is slowing, financial markets are tightening and capital is harder to find. It’s important to note the importance of being funded by a recession-proof industry such as energy. The horror stories of some developments can surely be attributed to cash-flow and external financing problems; having to borrow from one project to fund another only to have the market slow and the cash flow screech to a stop and ultimately the projects fail.
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